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TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 1079
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.... is perverse and bad in law. 2. That Ld. CIT (A) erred in law and fact in deleting the specific disallowances u/s 40A(3) of Rs.5,80,12,836/-(related to material consumed) and of Rs.1,81,47,450/-(related to labor payment) ignoring that the assessee failed to establish its genuineness and also failed to specify any mitigating circumstances for making such payment in cash in contravention of the provision of section 40A(3) of the I.T. Act, 1961. 3. The C1T(A) also erred in taking stand that addition made under any specific provision u/s 40A(3) of the IT. Act, case be overrided/substituted by general provision of I.T. Act by invoking section 145(3) of the I.T. Act. 4. The CIT(A) erred in not adjudicating ground no. 6 which is related to disallowance of depreciation of Rs.3,37,520/- which was wrongly mentioned in his order at Rs.33,75,200/-. 5. The appellant craves right to add alter or amend any ground which may be taken at the time of hearing." 3. This appeal filed by Revenue is almost four years old. This appeal was first fixed for hearing before Division Bench(DB) on 17.10.2109 , when none appeared on behalf of the assessee nor any adjournment application was moved, an....
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....hat the assessee did not produced books of account in the original assessment proceedings as also that the assessee did not produced any books of account even during the assessment proceedings conducted by the Assessing Officer in consequence of the revisionary order passed by ld. Pr. CIT u/s. 263 of the Act. The AO observed that the assessee has wrongly stated in his reply that books of accounts were produced before the AO during original assessment proceedings, while no books of accounts were infact produced by the assessee in original assessment proceedings , as found mentioned in the order sheet entry dated 24.02.2015. The AO further observed that no books of accounts were also produced in the assessment proceedings conducted by AO in consequence of the revisionary order passed by ld. Pr. CIT u/s 263. The AO further observed that no bills and vouchers were produced by the assessee during assessment proceedings conducted by AO in pursuance to revisionary order passed by ld. Pr. CIT u/s 263, and it was noted by AO in his order that except written submissions, nothing else was produced by the assessee. The AO observed that even in original assessment proceedings, the assessee has ....
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....AO asked assessee to explain these cash payments. The assessee submitted muster roll before AO, and it was observed by the AO that there are several inconsistencies in muster roll and further details of payees are not there. The AO further observed from muster roll that it is an afterthought by the assessee. The AO rejected muster roll by observing as under: "1. On going through the muster roll it is seen that numbers of labour employed by the assessee in a day is more than 20. The assessee has not paid any ESI, Gratuity, etc. as required under labour laws. Had this much strength of labours the assessee should have certainly taken permission of the concerned authority of labour department. 2. From this muster roll is it not clear that the same actually belong to the assessee. Even the assessee has not certified that the same pertains to him. 3. On these muster role the payments have been made at the end of the month only. However, in labour charges payment ledger it is seen that apart from the above payment of Rs. 1,81,47,450/- the remaining payment of Rs. 35,19,914/- has also been made on different dates other than month ending. This muster role does not contain the detail....
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....o day basis in a large amount, the payments were made in cash which cannot be made through cheque as the cash payment is made to building material suppliers and labours. The ld. CIT(A) observed that the suppliers of building material are generally truck drivers who do not accept cheques and labour also does not accept cheques. The ld. CIT(A) observed that if payment is otherwise genuine, then Section 40A(3) has no applicability even if the cash payment in a day is in excess of threshold limit. The ld. CIT(A) also gave finding that during original assessment proceedings u/s 143(3), the books of accounts were produced by the assessee, which were not rejected by AO u/s 145(3) of the 1961 Act. The ld. CIT(A) referred to Section 40A(3) and Rule 6DD of the Income-tax Rules, 1962. The ld. CIT(A) referred to decisions of the Courts and observed that ratio of law laid down by Hon'ble High Courts is that the object of Section 40A(3) is to check evasion of taxes so that payment is made from disclosed sources. It presupposes that the transaction must be a genuine transaction. The ld. CIT(A) observed that Rule 6DD relaxes the rigours of Section 40A(3) , in a genuine and bonafide cases to avoid ....
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.... far as prejudicial to the interest of Revenue and was accordingly set aside. The ld. CIT-DR submitted that the assessee did not produced books of accounts in the original assessment proceedings as well during assessment proceedings conducted by AO in consequence to the revisionary order passed by ld. Pr. CIT u/s 263 of the 1961 Act. The ld. CIT-DR submitted that additions were made by the AO u/s. 40A(3) , as the assessee made cash payments exceeding Rs. 20000/- in a day towards material purchases as well as labour payments. The ld. CIT-DR submitted that ld. CIT(A) rejected books of account u/s. 145(3) and assessed income of the assessee @ 6% of the gross receipt of Rs.10,18,28,011/-. 8. We have heard the contentions of the ld. CIT-DR and perused the material on record. The brief facts of the case are that assessee is a civil contractor. This assessee filed its return of income declaring total income of Rs. 64,87,970/-, on 29.09.2012 . The assessment was completed by Assessing Officer by assessing total income of Rs.67,43,840/- in original assessment proceedings conducted u/s 143(3) read with Section 143(2), vide assessment order dated 29.09.2012 passed u/s 143(3) of the 1961 Act ....
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....ssessee has made payments to the tune of Rs. 5,80,12,836/- towards material purchases which were paid in cash. The AO further observed that the ledger account submitted in original assessment proceedings and in the assessment proceedings in pursuance to revisionary order passed by ld. Pr. CIT , the assessee has submitted two different sets of material consumed ledger accounts, which were enclosed by the AO as annexure A and annexure B, both enclosed to the assessment order.The AO observed that the assessee has tried to bifurcate these cash payments to bring down below the threshold limit of Rs. 20,000/- per day. The AO observed that the assessee has not produced cash book, receipt book , bills or voucher(s), so that the payments could be verified. The AO observed that the assessee has changed the ledger account of material consumed to bring down cash payments within threshold limit of Rs. 20,000/- per day, in order to avoid being hit by provisions of Section 40A(3). The AO observed that in the material consumed ledger filed during assessment proceedings consequent to the revisionary order passed by ld. Pr. CIT, even names of the payee is changed. Further, the AO observed that none ....
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..... This muster role does not contain the details such of payments made dates other than month ending. Therefore, this muster role is not reliable. 4. The work has been conducted on three or four sites , who has supervised the work or who has made such payment to labours is not clear. 5. It has also not been clarified by the assessee that he has made payments to somebody who disbursed the amounts to the labours concerned. 6. It seems that this muster roll is an afterthought of the assessee." The AO observed that the assessee has not produced books of accounts, the availability of cash in hand cannot be verified. The AO observed that the payments have been made exceeding Rs. 20000/- in cash on single day, and no explanation has been offered by the assessee, which led AO to invoke provisions of Section 40A(3) and cash payments to the tune of Rs. 1,81,47,450/- towards labour payments, stood added to the income of the assessee , vide assessment order dated 12.12.2017 passed by AO u/s 143(3) read with Section 263 of the 1961 Act. The ld. CIT(A) has given erroneous finding that the books of accounts were produced by the assessee before the AO. Infact no vouchers, invoices, cash ....
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....ction of these cash expenses exceeding threshold limit in a day , can be allowed, in view of clear infringement/violation of Section 40A(3) , wherein Section 40A(1) contains a non obstante clause which stipulates that provisions of Section 40A(1) shall have effect notwithstanding anything to the contrary contained in any other provisions of the 1961 Act , relating to computation of income under the head "Profits and Gains of Business or Profession". It was for the assessee to have led evidences to substantiate that no such cash payments in excess of Rs. 20000 in a day was made, rather the assessee in assessment proceedings conducted by AO u/s 263 read with Section 143(3) instead of explaining that these cash payments are not hit by Section 40A(3) read with Section 40A(1), falsified the record by bringing on record second set of ledger's of material purchases and labour payments. The assessee has tried to wriggle out of clutches of Section 40A(3) by producing second set of ledger account in the assessment proceedings conducted by AO consequent to revisionary order passed by ld. Pr. CIT u/s 263. Once there is a clear infringement of provision of Section 40A(3) and the assessee is not....
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....tion 40A(1) which starts with non obstante clause . The ld. CIT(A) fell into an error in relying on Rule 6DD of the 1962 Rules and granting relief to the assessee, without appreciating that the assessee is not able to explain and make out its case for falling into exception as carved out by Rule 6DD of the 1962 Rules, and rather in fact the assessee instead of explaining its case on merits, manipulated and came out with second set of ledger for material purchases and labour charges wherein it claimed that no cash payments exceeding Rs. 20000 was made in a day to a person, in assessment proceedings conducted by AO u/s 143(3) read with Section 263. While in first of ledger of material purchases and labour payments, filed by the assessee in original assessment proceedings conducted by AO u/s 143(3) read with Section 143(2), the assessee filed ledgers of material purchases and labour payments, where the cash payment in a day exceeding Rs. 20000/- in infringement of Section 40A(3) and no explanation was made rather the assessee falsified and manipulated the records by bringing altogether different set of ledger of material purchased and labour payments. The AO has enclosed both the sets....